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Retail, Uncategorized

Scrunch the pack, pump up the price

Calcutta, March 22: Soap, detergent, chocolate and biscuit makers are quietly jacking up prices — in a way that the consumer won’t catch on easily. They are crumpling pack sizes while retaining the maximum retail prices.

The change in the packet size is so subtle that customers at supermarkets and neighbourhood groceries won’t realise that the prices of their favourite soap or brand of biscuits have risen by anywhere between 5 per cent and 50 per cent.

The price hike gambit may be achieved through clever deception but it isn’t illegal since the new packs carry the revised weight. Only those consumers who buy products like hawks — read the fine print on the packs and remember the old pack size — will be able to tell how much the prices have risen as a result of the grammage tweak.

Just a month ago, a consumer could get a 500 gm pack of Ariel detergent powder for Rs 74. Now, for the same price, the consumer will get just 425 grams — which amounts to a price markup of almost 18 per cent!

All the leading fast-moving consumer goods (FMCG) makers — Hindustan Unilever, Procter & Gamble, Henkel and Britannia — have jumped on board to adopt this legitimate strategy and hope the consumer doesn’t catch on.

Hindustan Lever marked up the price of its popular detergent brand Wheel by over 66 per cent.

Slowdown strategy

It’s the ideal strategy for a slowdown: in the boom-boom years, these companies simply raised prices and brand-conscious consumers paid without much demur.

However, the price increase this time round seems a little odd as it comes at a time when industrial growth has shrunk in the two consecutive months of December and January.

In January (the latest month for which the figures are available), industrial output contracted 0.5 per cent over the same month last year. A fall in industrial output is indicative of weakening demand. Normally, companies don’t raise prices when demand falters.

But FMCG companies haven’t seen slackness in demand — one of the few industrial segments that reported robust growth in the first six months of this financial year. The surge in farm incomes this year – especially after the Rs 70,000-crore loan writeoff last June — has underpinned growth in consumer durables this year.

Back in September, the consumer durables segment reported growth of 14.65 per cent. But it then stumbled to report negative growth rates in October, November and December. In January, growth was back at 2.5 per cent.

Companies play coy

Most of the FMCG companies aren’t talking about the new strategy to raise prices. Spokespersons for Hindustan Lever, Dabur and Henkel refused to comment on the price strategy. Biscuit and chocolate makers such as Britannia, Parle and Cadbury were equally evasive.

However, Procter & Gamble, the world’s largest producer of consumer products, was more forthcoming.

“The principle for pricing is that we do what is right for the consumer. We will continue to make sure that our propositions remain competitive based on the prevalent economic condition and yet continue to delight our consumers,” said a P&G spokesperson for its Indian operations in an email reply.

“There have been occasions where we have raised prices but any such decision is always made keeping strictly in mind the overall value we are offering to the consumer,” he said.

“Grammage adjustment is not a route that companies often take. If one company starts the process, the others follow pretty soon,” said a spokesperson for cigarettes-to-hotel conglomerate ITC.

Consumers livid

“We did not notice the change in the pack size,” said one housewife. “I caught on only when the detergent powder ran out sooner than I had expected.”

Local retailers say they weren’t informed of the change in pack sizes either — a trend that started in January. “We came to know about the change only when some consumers pointed it out to us,” said one local retailer.

Consumer activists are, however, split on whether or not this is a devious tactic.

Mala Banerjee, president of the Federation of Consumer Associations (West Bengal), said the companies were in the clear if they mentioned the prices and the weight on the packs. “As consumers, we need to check before buying,” she added.

However, Arun Saxena, president of the International Consumer Rights Protection Council (ICRPC), believes that the infirmities in the laws make it easy for manufacturers to hoodwink consumers.

“There are no laws that require the companies to disclose the change in the products’ price per weight. They are not required to disclose the old weight when they make a change,” he said.

Saxena believes that the government should formulate a law that makes it mandatory for companies to declare the unit weight of a product along with the price for the pack. This will make it easier for consumers to detect a change in pack sizes and weight.
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